Hometown Priorities Get Support in President’s 2013 Budget

February 20, 2012

by Federal Relations Staff

Last week, President Barack Obama unveiled his fourth federal budget proposal, a $3.8 trillion proposal that, among other things, would provide $50 billion for immediate transportation investments, $30 billion to modernize schools, $30 billion to hire teachers and first responders and $2.9 billion to support workforce development training programs.

NLC President Ted Ellis, mayor of Bluffton, Ind., said that city leaders are pleased with the overall direction of the budget, which tries to mix spending cuts with important investments in infrastructure and human capital. However, more can be done to give city governments the flexibility and resources to create opportunities at the local level.

"Federal investments in cities do not stay in City Hall. They go to local businesses and service providers who act as partners in transforming their neighborhoods and delivering services," said Ellis. "While it is important that Congress and the Administration continue to tackle the budget deficit, they also must still focus on creating an environment for private sector growth on the local level."

The President's proposal is a step in that direction, calling for $476 billion over six years for highways and mass transit, as well as initiatives that would enhance start-up access to credit, promote entrepreneurship and cut taxes for small businesses.

However, the President's budget only signals the beginning of the debate over spending for the next fiscal year, which begins on October 1, 2012. As Congress looks to push its own priorities, Ellis stressed that what the American public demands are results, not partisanship.

"The partisan bickering and political gamesmanship must come to an end," said Ellis. "Cities all over this nation put aside their party differences and pass budgets all the time. We expect the same from Washington."

The following are highlights of the President's FY 2013 budget proposal for federal investments in cities and towns.

Transportation

The President's transportation budget request proposes an overall investment of $476 billion in transportation programs over six years and includes funding for several NLC priorities, such as investment in public transportation, maintenance of existing infrastructure and bridge repairs. Expansion of these programs would be funded through cost savings from the war in Afghanistan.

The Administration's six-year plan would invest $50 billion for "immediate transportation investments," nearly half of which would go to highway and bridge repair, 30 percent to transit and rail and the rest to aviation and border crossings - an approach similar to that in the Administration's jobs plan released last year.

Beyond the immediate infusion of funds, the budget proposes: $305 billion for highways and $108 billion for transit, which improves the current 80-20 split to 75-25; $47 billion for rail re-investment, with a continued focus on intercity and high-speed passenger rail; $3.4 billion (approximately $600 million per year) for National Infrastructure Investments, supporting discretionary grant programs like the TIGER grants; and $3 billion ($500 million per year) for the Transportation Infrastructure Finance and Innovation Act, a fourfold increase over current levels but only half of what the House and Senate suggest per year.

The President's budget also proposes that two new accounts be added to the Highway Trust Fund: one for transit and another for national infrastructure investments.Housing and Community Development

The President's proposal calls for increases in the Department of Housing and Urban Development (HUD) budget by 3.2 percent to $44.8 billion. However, much of that increase would be absorbed by inflation, as more than 80 cents of every dollar in the FY 2013 HUD budget is required to merely maintain assistance to those who already receive it.

Consequently the President's budget does not propose restoring funding cut from the Community Development Block Grant (CDBG) or the HOME program in FY 2012. Instead, the proposal keeps CDBG funding level at $2.9 billion and HOME at $1 billion, saying that "these choices do not reflect these programs' quality and efficacy but rather the fiscal reality the department faces."

Section 8 tenant-based rental assistance would receive a slight increase to $19 billion, compared to $18.9 billion last year. However, the increase would only provide for existing vouchers and no new vouchers. The President also proposes to restore $100 million to fund HUD's role in the multi-agency Partnership for Sustainable Communities. Congress eliminated funding for Sustainable Communities in the HUD budget last year.

For rural communities, the U.S. Department of Agriculture budget calls for increases in direct loans for water and waste disposal by $269 million and provides $700 million for community facilities. The proposal also calls for level funding for both Rural Economic Development loans and grants at $43 million and Single Family Housing Assistance at $24 billion.

Tax Policy

In an area of concern for cities and towns, to help offset spending in the budget, the President proposes to place a cap on the amount of certain tax deductions and tax exclusions - including interest on bonds issued by state and local governments - that is intended to cause higher income tax payers to pay at least a 28 percent tax rate. Under the retroactive proposal, investors with adjusted gross incomes exceeding thresholds set in the President's proposal would no longer be able to receive the full benefit of the tax-exempt interest they paid when they bought the bonds. In the case of newly issued tax exempt bonds, this change in tax policy could lead to investors demanding higher interest rates, which could translate into higher borrowing costs for local governments, fewer resources for infrastructure investment and fewer jobs created.

In response to this provision, NLC, along with other state and local government groups, highlighted their concerns in a letter sent earlier this week to the House Ways and Means Committee as it prepared for a hearing on the budget proposal.

NLC is supporting another bond-related provision in the proposal. The budget calls for the permanent extension of the Build America Bond program at a subsidy rate of 30 percent for two years and for extending it permanently thereafter at a subsidy rate of 28 percent, which is approximately revenue neutral.

Workforce Development, Education and Health and Human Services

The President's budget proposal includes some positive news for federal workforce development and education programs. It proposes an overall increase in funding for Workforce Investment Act programs by more than 10 percent, from $2.6 to $2.9 billion. Funding for the Workforce Innovation Fund, a grant program supporting innovative methods of delivering workforce development services, would double, from $50 million to $100 million.

In addition, the President introduced three new job training initiatives in his budget. Pathways Back to Work, funded at $12.5 billion, would offer individuals who are no longer eligible for unemployment insurance, access to job training, job search assistance and subsidized employment. Reemployment NOW, funded at $4 billion, would assist those receiving Extended Unemployment Compensation with finding employment. The Community College to Career Fund, jointly funded by the Departments of Education and Labor at $4 billion per agency, would aim to train 2 million workers for well-paying jobs in high-demand industries.

On the education front, the President proposes level funding for Title I programs at $14.5 billion to help disadvantaged youth, and slightly increasing special education funding by $100 million to $12.7 billion. Race to the Top, a program the President has championed for several years now, would receive a $300 million increase from $549 million to $850 million.

Health and Human Services programs generally did not fare as well in the President's budget. Though both Head Start and the Social Services Block Grant programs would remain level funded at $8.1 billion and $1.7 billion respectively, the Low Income Home Energy Assistance Program would be cut by 15 percent, from $3.5 billion to $3 billion.Energy and Environment

Under the President's request, the U.S. Department of Energy's (DOE) budget would increase by $855.5 million, or 3.2 percent, in FY 2013 in order to meet priorities, such as increasing the nation's energy security, stimulating investment and job creation and accelerating efficient and clean electricity supplies.

The DOE Office of Energy Efficiency and Renewable Energy would receive $2.337 million - an increase of $527.4 million or 29.1 percent above the enacted level for FY 2012 - for investments in solar, wind and other renewable energy technologies and energy efficiency improvements to the nation's building stock and vehicles.

The budget proposal calls for $139 million for Weatherization Assistance Grants, $71 million more than the program's low point of $68 million in FY 2012. Additionally, the proposal would fund local government grant opportunities, including the Better Buildings Initiative, which encourages the use of energy efficient and renewable energy technologies and practices in residential and commercial buildings, and the Rooftop Solar Challenge, which aligns local and regional permit requirements, land use codes and zoning ordinances to spur rapid expansion of solar energy and lower installation costs for homes and businesses.

Overall funding for the U.S. Environmental Protection Agency (EPA) was decreased to $8.344 billion, $105 million less than the enacted level for FY 2012. The proposal also reduces funding for the Clean Water and Drinking Water State Revolving Loan Funds (SRF) by $359 million total, or about 15 percent. The Clean Water SRF would receive $1.175 billion and the Drinking Water SRF would receive $850 million.

The Superfund and Brownfields programs would receive near-level funding - Superfund at $1.176 billion, a decrease of $37.377 million or 3.1 percent, and Brownfields at $93.291 million, a decrease of $1.557 million or 1.5 percent.

Additionally, the President's budget allots $14 million to fund a new effort to assess potential air, ecosystem and water quality impacts of hydraulic fracturing. EPA will release an interim report on the impacts of hydraulic fracturing on drinking water resources later this year. NLC policy supports these efforts for further study.

Public Safety and Homeland Security

In addition to the tax cap proposal, suggested changes to the State and Local Homeland Security Grant programs are also an issue of concern for cities. The Administration proposes to shift 16 grant programs that primarily fund local first responders into one state block grant program, the National Preparedness Grant Program. As proposed, states would be required only to pass funding to existing Urban Area Security Initiative recipients. The remainder of the funds, of which more than 80 percent has historically gone to local jurisdictions, would now be distributed by states based on threat assessments developed at the state level.

There are some positives in the budget for public safety and homeland security programs. The President's budget recommends a $500 million increase in funding for Homeland Security Grants over FY 2012. It also provides $670 million for Firefighter Assistance Grants: $420 million to retain and hire firefighters and first responders and $250 million for equipment, training, vehicles and related materials.

Additional increases for key state and local law enforcement programs include $257 million for hiring and retaining law enforcement officers through the COPS Program - a $90 million increase over FY 2012 levels - and $430 million for Byrne Justice Assistance Grants, an increase of $60 million from last year. The budget also requests increased funding for a range of prisoner reentry programs, juvenile justice grants and a number of grants for innovative local programs based on proven methodology.

Unfortunately, the budget does request the elimination of the National Pre-Disaster Mitigation Grant program (PDM), which provides funds for mitigation projects prior to a disaster event. PDM has been proven to save four dollars in response and recovery for every dollar spent on the program.